A new report released by the US Department of Energy questions $439 million in costs claimed by Los Alamos National Lab, and cites issues with LANL operator Los Alamos National Security LLC's auditing procedures.---
The DOE report, released April 19, calls into question LANS' expenditures during FY 2008 and 2009, in addition to some from FY 2007, and criticizes LANS' auditing procedures that were in place at least until FY 2010. During that period, LANS spent $2 million that DOE is still investigating, plus $437 million in payments to subcontractors that are also sources of concern, according to the report.
The questioned LANS costs primarily consist of salary payments for two employees who "charged a combined total of 1,656 hours to the contract between November 2007 and June 2008 while conducting job searches." The DOE found that the $1.9 million paid to those employees either didn't benefit the National Nuclear Security Agency (the division of DOE that oversees LANL) or was out of compliance with the contract provisions. Furthermore, the report notes that LANS itself reviewed the payments and deemed them "not significant or unreasonable," a judgment DOE is questioning.
"It's shocking that Los Alamos Lab would consider nearly $2 million in questionable costs to be neither 'significant or unreasonable,'" Jay Coghlan, Executive Director of NukeWatch New Mexico writes SFR in an email. "But this is in keeping with a bloated and top-heavy institution that has overhead costs of just under 50 percent, and where the Lab director pulls down $1 million in compensation every year while also acting as president of the board of the for-profit management contractor."
The DOE report also finds that LANS' procedures for auditing its subcontractors' expenses was inadequate. The audit function was understaffed and "conducted reviews that did not meet generally accepted Government auditing standards." The audit paperwork created by LANS didn't support its conclusions or provide adequate evidence of its findings, the DOE report states.
The report notes that LANS procedures for auditing subcontractors up through FY 2010 was not sufficient to ensure that only allowable costs were paid with federal money. During that period, LANS required auditing of only two out of 975 subcontracts, and lacked any procedures for independently determining contracts' risks or randomly auditing subcontracts.
According to the report, NNSA notified LANS last November that it needed to step up its efforts to ensure subcontractor expenses are warranted.
The report does state that LANS "has submitted a revised audit strategy proposal that includes positive steps toward resolving the issues noted in the [DOE] report."
LANL spokesman Kevin Roark writes SFR in an email that lab management made changes to its subcontractor auditing process "almost two years ago," and is working with NNSA to apply the new standards to prior years' expenditures. However, he contradicts the DOE report's assertion that the lab's auditing procedures have not been in line with standard federal government practices in the past.
"We have a rigorous process in place that ensures that subcontractors are paid appropriately and payment is commensurate with a given scope of work," Roark writes.
